SCA's Strategic Position in Renewable Resources and Sustainable Growth in Q2 2025

In the second quarter of 2025, Svenska Cellulosa Aktiebolaget (SCA) demonstrated its resilience as a leader in renewable resources and sustainable growth, delivering strong financial results amid challenging market conditions. With EBITDA reaching just over SEK 2 billion and a margin of 38%, SCA's performance highlights its ability to navigate market volatility while maintaining a long-term commitment to environmental stewardship and sustainable operations. This analysis explores SCA's strategic position and evaluates its potential for long-term value creation through three key pillars: forest ownership, operational efficiency, and exposure to high-growth renewable sectors.

Strategic Forest Ownership and Sustainability Practices

SCA manages over 2 million hectares of forest in the Nordic region, with a 100-year planning horizon that ensures the perpetual availability of renewable raw materials. This long-term perspective is central to SCA's value proposition, as it balances economic returns with environmental and social responsibilities. The company's landscape ecological planning approach identifies areas for timber production and conservation, ensuring that biodiversity is protected while maintaining productive forest resources.

SCA's commitment to responsible forestry is reflected in its certification under FSC and PEFC standards. While the company had initially planned to pause its FSC Forest Management certification in Sweden due to concerns about the evolving standards, constructive dialogues with stakeholders led to a postponement of this decision. This flexibility demonstrates SCA's commitment to engaging with certification bodies and adapting its practices to align with both economic and environmental objectives.

The company's forest management strategy includes innovative conservation techniques such as prescribed burning to mimic natural forest regeneration and wetland restoration to enhance ecological value. SCA's SED (Gentle Effective Logging) method minimizes environmental impact during harvesting operations, reducing damage to soil and water systems. These practices not only support biodiversity but also enhance operational efficiency by improving logging outcomes and reducing environmental remediation costs.

Operational Efficiency and Cost Control

SCA's operational efficiency is a key driver of its financial performance. In Q2 2025, the company delivered a 38% EBITDA margin, outperforming many of its peers in the forest industry. This achievement is attributed to strategic investments in production facilities, such as the Bollsta sawmill and Obbola Containerboard mill, which are enhancing productivity and cash flow generation.

The company's ability to manage costs is evident in its Containerboard segment, where EBITDA surged by 95% year-on-year. This was achieved through higher prices and lower costs, despite challenges such as increased wood raw material costs and negative currency effects. SCA's cost control measures are particularly important in the Pulp segment, which faced a 49% EBITDA decline due to higher raw material costs and lower prices. The company's ability to navigate these challenges while maintaining profitability in other segments demonstrates its operational resilience.

SCA's focus on innovation and digitalization is also enhancing operational efficiency. The company is investing in technologies that improve production processes, reduce waste, and optimize resource utilization. These initiatives are expected to drive long-term value creation by improving margins and reducing environmental impact.

Exposure to High-Growth Renewable Sectors

SCA's strategic position in renewable energy and sustainable materials provides exposure to high-growth sectors that are critical for the global transition to a low-carbon economy. The company's Renewable Energy segment delivered a healthy EBITDA margin of 18% in Q2 2025, despite challenges such as low power prices and a warm winter that weakened the market for solid biofuels.

SCA's pellet delivery initiative is a prime example of its commitment to renewable energy. In July 2025, the company shipped 5,000 tons of pellets using sea freight, reducing carbon dioxide emissions by nearly 75% compared to road transport. This initiative not only demonstrates SCA's environmental commitment but also highlights its ability to innovate in logistics and supply chain management.

The company's wind power operations are another key growth area. SCA's land lease business for wind power generates 9.7 terawatt hours annually, representing 20% of Sweden's installed wind power capacity. The Fasikan windmill project is progressing according to plan, further solidifying SCA's position in the renewable energy sector. These investments align with global trends toward decarbonization and are expected to generate stable cash flows as demand for clean energy continues to grow.

Financial Position and Investment Outlook

SCA's strong financial position supports its long-term growth strategy. With leverage at 1.8x and operating cash flow of SEK 953 million in Q2 2025, the company has the financial flexibility to invest in strategic initiatives while maintaining a strong balance sheet. The company's focus on capital efficiency and disciplined investment is evident in its capital employed of SEK 170 billion and net debt of SEK 13 billion.

Looking ahead, SCA faces challenges in the Pulp segment due to U.S. tariffs and global uncertainties, but its diversified business model and strong cash flow generation provide resilience. The company's exposure to high-growth renewable sectors and its commitment to sustainable forest management position it well for long-term value creation.

Investors considering SCA should evaluate its strategic investments in renewable energy, its ability to maintain operational efficiency in volatile markets, and its long-term commitment to environmental stewardship. The company's 100-year forest planning horizon, combined with its innovation in sustainable practices, creates a compelling investment proposition for those seeking exposure to the transition to a low-carbon economy.

Conclusion

SCA's Q2 2025 results and strategic initiatives demonstrate its position as a leader in renewable resources and sustainable growth. The company's long-term forest ownership strategy, operational efficiency, and exposure to high-growth renewable sectors create a strong foundation for value creation. While challenges exist in specific segments, SCA's diversified business model and financial strength provide resilience. For investors seeking long-term growth in sustainable industries, SCA offers an attractive investment opportunity that aligns with global trends toward decarbonization and environmental responsibility.